The International Monetary Fund has kept its economic growth forecast for Bangladesh unchanged, which it set at 5.5 percent for the current fiscal year in January.
But the latest outlook is 0.5 percentage points lower than the prediction the IMF made six months earlier.
The global outlook report by the IMF, released on Tuesday, also forecast no change in Bangladesh’s GDP growth in FY24, which is predicted to be 6.5 percent.
The global lender had forecast 6 percent growth for the current fiscal year in its October 2022 report.
In its Bangladesh country report, published in January during the approval of $4.7 billion loans to help the country avert an economic crisis, the IMF said global headwinds are expected to weigh on the near-term outlook and inflation is set to remain elevated.
Average headline inflation in FY23 was expected to increase to 8.9 percent, driven by rising domestic food and fuel prices and the pass-through of large taka depreciation, the IMF had said in that report and warned high inflation, while adding to economic uncertainty, would reduce consumer spending.
In the latest report, the IMF said consumer prices will slow slightly to 8.6 percent in FY23 and further to 6.5 percent in FY24.
The country report predicted the current account deficit is expected to improve to 3.2 percent of GDP in FY23 from 4.1 percent the previous fiscal year, given strict import control.
The April outlook by the IMF says Bangladesh’s current account deficit will improve further to 2.1 percent of GDP in the ongoing fiscal year before widening again to 4.2 percent of GDP in FY24.
Earlier in April, the World Bank predicted Bangladesh’s real GDP growth will decelerate to 5.2 percent in FY23 due to rising inflation, tighter financial conditions, disruptive import restrictions, and global economic uncertainty. In FY24, growth is expected to pick up to 6.2 percent.
The Asian Development Bank said Bangladesh’s gross domestic product is expected to grow by 5.3 percent in the 2023 fiscal year. The slower growth forecast reflects subdued domestic demand and weaker export expansion due to slow global growth following the Russian invasion of Ukraine, according to the ADB’s report.
In its Bangladesh country report, published in January during the approval of $4.7 billion loans to help the country avert an economic crisis, the IMF said global headwinds are expected to weigh on the near-term outlook and inflation is set to remain elevated.
Average headline inflation in FY23 was expected to increase to 8.9 percent, driven by rising domestic food and fuel prices and the pass-through of large taka depreciation, the IMF had said in that report and warned high inflation, while adding to economic uncertainty, would reduce consumer spending.
In the latest report, the IMF said consumer prices will slow slightly to 8.6 percent in FY23 and further to 6.5 percent in FY24.
The country report predicted the current account deficit is expected to improve to 3.2 percent of GDP in FY23 from 4.1 percent the previous fiscal year, given strict import control.
The April outlook by the IMF says Bangladesh’s current account deficit will improve further to 2.1 percent of GDP in the ongoing fiscal year before widening again to 4.2 percent of GDP in FY24.
Earlier in April, the World Bank predicted Bangladesh’s real GDP growth will decelerate to 5.2 percent in FY23 due to rising inflation, tighter financial conditions, disruptive import restrictions, and global economic uncertainty. In FY24, growth is expected to pick up to 6.2 percent.
The Asian Development Bank said Bangladesh’s gross domestic product is expected to grow by 5.3 percent in the 2023 fiscal year. The slower growth forecast reflects subdued domestic demand and weaker export expansion due to slow global growth following the Russian invasion of Ukraine, according to the ADB’s report.
DEEPER FINANCIAL TURMOIL WILL SLAM GLOBAL GROWTH
The IMF trimmed its 2023 global growth outlook slightly – at 2.8 percent for 2023 and 3 percent for 2024, as higher interest rates cool activity. It warned that a severe flare-up of financial system turmoil could slash output to near recessionary levels. The latest report marks a sharp slowdown from 3.4 percent growth in 2022 due to tighter monetary policy.
The report includes two analyses showing financial turmoil causing moderate and severe impacts on global growth.
In a “plausible” scenario, stress on vulnerable banks – some like failed Silicon Valley Bank and Signature Bank burdened by unrealised losses due to monetary policy tightening and reliant on uninsured deposits – creates a situation where “funding conditions for all banks tighten, due to greater concern for bank solvency and potential exposures across the financial system,” the IMF said.
This “moderate tightening” of financial conditions could slice 0.3 percentage point off of global growth for 2023, cutting it to 2.5 percent.
The Fund also included a severe downside scenario with much broader impacts from bank balance sheet risks, leading to sharp cuts in lending in the U.S. and other advanced economies, a major pullback in household spending and a “risk-off” flight of investment funds to safe-haven dollar-denominated assets.
Emerging market economies would be hit hard by lower demand for exports, currency depreciation and a flare-up of inflation.
This scenario could slash 2023 growth by as much as 1.8 percentage points, reducing it to 1 percent – a level that implies near-zero GDP growth per capita. The negative impact could be about one-quarter of the recessionary impact of the 2008-2009 financial crisis.